Club La Costa in Administration and Claims in Spain
There has been a great deal of publicity in recent months regarding Club La Costa going into Administration, most of the publicity being generated by ex-timeshare salesmen now posing as claims management companies, cold calling current and former members of Club La Costa Holiday Clubs.
As always with cold callers they are basing information on half truths in order to encourage consumers to part with significant sums to pursue claims in Spain against Club La Costa.
It has been apparent for some time that whilst judgments were being obtained against Club La Costa through the Courts in Spain as a result of breaches of The Timeshare Regulations, there were difficulties in enforcing those judgments, mainly because claims had to be brought against Club La Costa sales companies which had little by way of assets, domiciled within the jurisdiction of the Spanish Courts. For this reason, whilst there has been a great deal of publicity on the internet about judgments being obtained, there has been little publicity about claimants actually recovering compensation that they have been claiming. If you have engaged the services of an unregulated claims company this will not surprise you. Your claims, if pursued at all, will have been met with delay, various appeals and a frustrating inability to enforce any judgment obtained.
We have now had sight of the proposals prepared by Club La Costa’s Administrator, which makes interesting reading. Reading the report it is clear that any claim brought against Club La Costa sales companies are unlikely to result in any compensation being paid. For consumers that have already issued proceedings and obtained judgment, the best that they can hope for is that they become recognised as an unsecured creditor. If you have been contacted by a cold caller and have yet to commence proceedings, it is strongly recommended that you take independent legal advice from a regulated solicitor as you may find that you are throwing good money after bad.
Regarding the Administrator’s Report, the following is noteworthy:
- The Report has been prepared by a Licensed Insolvency Practitioner who is also an Officer of the Court. There is therefore no reason to doubt that the statements contained within the proposals are accurate.
- Club La Costa (UK) Plc is part of a wider group of more than 16 entities organised in various jurisdictions including Spain and the United Kingdom.
- The Group’s main activity is the sale of timeshares and the management of timeshare resorts principally situated in Spain. It operates in Spain as Club La Costa (UK) Plc Sucursal en Espana, which is the branch of the company formally registered in Spain.
- The Company is the main UK trading entity and acted as a sales vehicle selling timeshare weeks in timeshare resorts.
- CLC does not own the timeshare properties as these are held in a separate Trust structure by an independent offshore Trustee.
- The sales and marketing functions of CLC were carried out in the UK and Spain, partly through employees and partly through self employed commission only agents. As CLC does not own any of the properties this may explain why there has been difficulty in enforcing Spanish Judgments obtained from the Courts in Spain.
- In the Administrator’s Report is conceded that CLC members have been contacted by various claims management companies and claims have been commenced as a result of the Spanish Supreme Court in 2015 interpreting Spanish Mandatory Law introduced in 1998 relating to the sale of timeshares.
- Initially CLC and the wider group were able to defeat the claims on the grounds that contracts were governed by English law and English Courts had jurisdiction. Latterly these grounds were not upheld by the Spanish Courts and the Group, including CLC, faced an increasing number of claims and judgment.
- As of November 2020, there were approximately 700 claims ongoing against the Company with a total value of approximately 32,000,000€. Given the significant claims being faced by CLC and the increasing judgments being entered, coupled with the Covid 19 pandemic, creditor pressure began to mount with the result that CLC entered into formal Administration in England as main proceedings, with secondary insolvency proceedings in Spain in respect of the Sucursal.
- On 17th November 2020, an in-Court application for the appointment of Joint Administrators was made by the directors of the Company.
- On 20th November 2020 Joint Administrators were appointed.
- The effect of Administration is that a moratorium is created which means that claims against a company cannot be pursued. Essentially the moratorium enables the company to attempt to realise assets for the benefit of all creditors. Steps are now being taken by the Joint Administrators to realise the assets of the Company.
- There are no secured creditors.
- The Directors Statement of Affairs estimates the total UK preferential claims will be approximately £129,000 and in Spain £1.1m. Based on current information it is anticipated that there should be sufficient funds to enable a distribution to be made to the preferential creditors, although this will be dependent upon the final level of asset realisation, associated costs and balancing of each of the insolvency proceedings in England and Spain.
- It is important to note that timeshare consumers bringing claims in Spain through the Courts or in contemplating such claims are not preferential creditors.
- The Directors Statement of Affairs estimates that unsecured creditors in the UK and Spain as at the date of appointment total £9.2m excluding the potential claims of contingent or future creditors. In other words, the 32m€ claims before the Courts in Spain have yet to be accepted as bonafide creditors. As we will explain below, however, the point is probably moot.
- The Joint Administrators estimate the Company’s assets to be realised to total £1,292,000.
- Looking at the Statement of Affairs, trade creditors total £1,585,618.53. There will also be the Administrators’ fees to pay. It is clear from the above that there will be insufficient assets to repay unsecured trade creditors, let alone satisfy contingent consumer claims approximated at 32m€.
For the reasons set out above:
- Due to the moratorium created by the Administration in both the UK and in Spain it will not be possible to pursue through the Courts claims against the selling companies that sold you your timeshare.
- At best, you will become an unsecured creditor and it is extremely unlikely, even if you are accepted as an unsecured creditor that you will receive any money following realisation of Club La Costa assets.
We are sure that the above will be a bitter disappointment to anyone who has engaged the services of an unregulated cold calling claims company and we have warned for some time that consumers should only be dealing direct with regulated lawyers, whether in the UK or Spain. With respect to litigation in Spain:
- It is never guaranteed. These claims have been defended vigorously by CLC and subject to numerous and protracted appeals.
- Even if claims succeed in Spain there is no guarantee of recovery of legal costs. Such costs are of course at the discretion of the Court. What is clear is that cold calling claims companies have a “mark up”. In our experience often these companies charge a fixed fee and at best approximately 50% of money paid actually finds its way to the lawyers that have conduct of the case. The costs of a claims management company would never be recoverable from the Court as they do not directly relate to legal services.
- Due to the involvement of offshore trust companies, enforcement of any judgment was always going to be difficult.
Given the above issues this firm has always treated claims in Spain with caution and the focus of our work has been directed at securing termination of timeshare contracts and bringing claims against UK lenders who financed the sale of timeshares.
How Athena Law Can Help
Athena Law is a regulated firm of solicitors.
Mr. Boyd and his team and solicitors are experts in timeshare law and UK finance claims.
If you have grounds to terminate your timeshare and/or bring a compensation claim we can offer you a fixed fee and/or no win – no fee retainer subject to an initial assessment of prospects.
We are also being increasingly instructed by clients to bring claims against unregulated claims companies.
We are happy to undertake initial review of your case and potential claims without charge and determine if you have grounds for terminating your timeshare or if you have a claim for compensation.
About the author
Stephen Boyd is one of the owners and co-founders of Athena Law, a firm of solicitors regulated by the Law Society and Solicitors Regulation Authority.
Mr Boyd has been practicing commercial and consumer litigation for almost 20 years and has developed a niche practice in dealing with timeshare disputes and indeed was one of the first UK solicitors to work in this area and has appeared in all forms of media, including television, print and media.
Links to Mr Boyd’s media work can be found below. Alternatively, they can be accessed from the Athena Law website – athlaw.co.uk, or its subsidiary site specialising in timeshare issues – timeshare-solicitor.co.uk.
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If you need any advice or further information regarding this article, please contact us.
As discussed above we offer a free initial consultation and if clients have a viable claim, we offer a variety of retainer options including no win – no fee arrangements. Every case or potential case will have to be assessed, however, on its own merits.
If you have found this article interesting and would like to learn more about how Athena Law can help you please feel free to contact the writer, Stephen Boyd, at firstname.lastname@example.org or via the contact page on the website.